Urgency on the Farm Bill

Urgency on the Farm Bill Created by rrummel on 1/21/2014 3:28:41 PM

Courtesy: Farmland Forecast

The Farm Bill is one of the most important pieces of legislation passed in Congress, not only is it essential for the agricultural community, but also for the American consumer. The bill funds the federal nutrition assistance programs with 80% of the bill’s nearly $1 trillion price tag, while also providing federal crop insurance that insures the U.S and global food supply grown by American farmers.Since expiring on January 1, 2014, agricultural producers have been unable to plan out their 2014 season due to the lack of Farm Bill legislation. Expiration of the bill also puts the American consumer at risk of paying higher prices for every day food items. It is important for Congress to pass an updated bill to provide producers with direction for the upcoming season and to keep pace with the progressive farm community.

Farm Bill: Since the passage of the first Farm Bill in 1933, as part of President Franklin Delano Roosevelt’s New Deal, Congress assumed the task of revising this important piece of legislation. Every five years programs are created, revised, and eliminated in an effort to best reflect the ever changing industry that is agriculture. The Farm Bill covers topics ranging from commodity subsidies and crop insurance to the federal nutrition assistance program.

Estimations for the cost of the 2014 Farm Bill range from $955 billion in the Senate adopted bill, to $921 billion in the bill being presented by the House. A provision written into the each Farm Bill since 1949 called “permanent law” has come into effect following the 2008 Farm Bill expiring for a second time in January 2014, after Congress failed to come to an agreement following the extension in 2013.

The Agricultural Adjustment Acts of 1938 and 1949, or the permanent law provision, was initially written to deter lawmakers from delaying new farm legislation. The negative impacts of a reversion back to the Farm Bill of 1949 are wide spread, impacting not only ranchers and farmers, but American consumers as well. The impacts of reversion can be summed up by a topic reported quite heavily following the second expiration of the 2008 Farm Bill; the “dairy cliff.”

Dairy Cliff: The dairy cliff, a term coined in late 2012 due to its proximity to the “fiscal cliff” the country faced, is an advent of the Agricultural Adjustment Act of 1949 and the Dairy Product Price Support Program (DPPSP). The DPPSP provides stability in the dairy market by placing a “purchase price” on milk. In the event the market price of milk were to fall below the purchase price, the government would be required to buy milk to decrease the national supply and in effect raise the market price of milk back to levels above the purchase price.

Currently, the market price of milk is $20.44/cwt and the 2008 Farm Bill had a purchase price of $9.90/cwt. When permanent law becomes implemented, the purchase price of milk would rise to $37.20/cwt. The purchase price of milk now is very different from the Agricultural Act 1949 because of mechanization in the milking industry. In 1949, milking was done almost strictly by hand creating much higher operating costs that farmers would need to cover. When permanent law comes into effect, dairy farmers would sell all of their milk to the government at a premium, creating a shortage in the consumer market where milk prices would most likely double.

Though the United States has reverted back to permanent law, the USDA Secretary Tom Vilsack holds final discretion on when permanent law becomes implemented. Vilsack said, “We will do whatever we are legally obligated to do,” but he also explained that there are many ways for the USDA to slow the process and provide Congress with enough time to get a new Farm Bill completed.

Passing the Bill: Congress has a small window of time to come to a resolution regarding the 2013 Farm Bill, with impending reversion threatening to disrupt both the agricultural community and American consumers. Both the Senate and the House passed their versions of the 2013 Farm Bill this summer. In the Senate, the Agriculture Reform, Food, and Jobs Act of 2013 (S. 954), was adopted by a vote of 66-25 on June 10.

In the House, the Federal Agriculture Reform and Risk Management Act of 2013 (H.R. 2642), was adopted by a vote of 216-208 on July 11. The bill is now being debated by the Joint Congressional Agricultural Committee led by Senators Debbie Stubenow D-Mich and Thad Cochran R-Miss with Representatives Frank Lucas R- Okla and Colin Peterson D-Minn.

The Senate and House proposals are very similar on the agricultural titles, which account for roughly 20% of the cost of each bill. The largest changes in legislation from the 2008 Farm Bill include elimination of direct payments to farmers, reorganization of the counter-cyclical price (CCP) program and the Average Crop Revenue Election (ACRE) program, and requiring farmers to be actively engaged in farming to receive subsidies from commodity programs. For the other titles impacting the agriculture industry, including conservation and crop insurance, the legislation makes very few changes. Both bills consolidate many programs and reinstate others at lower costs and acreage allotments in an effort to save money and reflect how ranching and farming are changing with improvements in technology.

Projections that a new Farm Bill will be passed as early as the end of January have been dampening fears of the dairy cliff and other negative effects of reversion. Concerns over farmer’s inability to plan for the 2014 crop season due to no new piece of legislation seem to be misplaced. While it is true that no final resolution has been voted on, the majority of the disagreements are conversations centered around cuts made to the Supplemental Nutrition Assistance Program (SNAP). Comparisons of the two proposals show no drastic changes to current programs or any new programs that will disrupt the agricultural community on a macro- or micro-level.

While we cannot be sure when the 2014 Farm Bill will be signed or what long lasting effects its changes will have, we can be sure that five years from now the topic of the Farm Bill will again be heavily debated because of its impact on the agricultural community.